Page 342 - Introduction to Business

316 PART 3 Marketing

products that have been phased out. The new products will replace lost revenues
and profits, keep the company name before present customers, and enable idle
resources to be reemployed.
Many companies have a pronounced seasonal pattern of sales or production.
Such peaks and valleys do not allow firms to operate efficiently. Thus, they will offer
new products or services in the off-season in order to smooth out sales and pro-
duction. An example would be an income tax service that decides to offer year-
round financial advisory services.
Companies often have a large percentage of their revenues and profits
accounted for by only a few products. If these start to be problematic, the firms will
be in trouble. New products can be introduced to reduce the risk the companies are
facing. Hershey Chocolate reduced its emphasis on chocolate products by branch-
ing out into macaroni, bakeries, restaurants, and coffee-brewing equipment.
Companies have discovered that new products developed from waste or by-
products can boost revenues and profits. Many of the by-products from the oil-
refining process can be used in plastics and pharmaceuticals. Meat packers make
effective use of by-products in such products as Jell-O.
Exploiting new opportunities is another explanation for developing new prod-
ucts. A need that is not currently being met can be satisfied with a new product. Or,
a competitive firm may stop marketing a product, leaving the door open for other
companies to fill the void with new product offerings.

New Product Philosophy. To develop new products, companies need to
adhere to a basic philosophy. At the outset, they need to decide whether they want to
be first in the market with new products or to employ a follow-the-leader strategy.
First-mover companies have the advantage of maximizing potential revenues and
profits because they have the market to themselves. However, they face high risk,

A new airport screening device
searches for explosive residue by
blowing particles from clothing.

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